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Result Synopsis NMDC’s Q2FY24 earnings were above the consensus estimates on the back of strong operational performance. NMDC reported its best ever Q2 and H1 performance in terms of production and sales. With iron ore prices witnessing a major drop over the last few months, the company was still able to sustain its realizations over the Rs 4,000/t mark. The realization/t came in at Rs 4,145/t, reporting a major drop from Q1FY24, where the same was Rs 4,851/t. The company’s EBITDA margins took a hit and fell to 38% and the management seems confident that the price pressures are over and the guided margins of over 40% are easily sustainable. The company incurred about Rs. 1,000 crores of capex during H1FY24 and with the current expansion phase and the upcoming aspirational plans, it seems to be on the right path for its 100mt target by 2030. During the current financial year, NMDC expects to incur Rs. 2,000 crores of capital expenditure in total and the company also maintained its production guidance of 47.0 to 49.0 mt. The capex for the current financial year focuses a lot on improving the company’s evacuating lines in order to grow simultaneously on the production and the sales side In terms of the operational performance, the company reported an iron ore production of 19.60 mt and registered iron ore sales of 20.55 mt recording their highest ever first half volumes. Q2 production volumes which came in at 8.85 mt, reported a rise of 25% YoY whereas the sales volumes for the quarter jumped 14% YoY. We have re-rated NMDC as an ADD as we believe that the rising domestic iron ore demand in India is expected to remain strong and NMDC plays an important role in being the country’s main iron ore supplier. Additionally, with the upcoming projects and the production growth guidance provided by the company, we see that NMDC will continue to dominate at the center stage in the iron-ore market in India. We value NMDC at 5xFY25E EV/EBITDA to arrive at our target price of Rs 186/sh.

Result Highlights

* Consolidated Revenue for the quarter stood at Rs 40,140 mn (vs our estimate of Rs 43,650 mn), down 26% QoQ & up 21% YoY.

* EBITDA Margins came in at 38% as compared to 42%/38% in Q1FY24/Q2FY23 respectively. Consolidated EBITDA stood at Rs 15,115 mn, down 34% QoQ and up 18% YoY.

* PAT stood at Rs 10,251 mn (vs consensus estimate of Rs 13,826 mn), down 38% on a QoQ basis and up 16% on a YoY basis.

* Average domestic realizations stood at Rs 4,146/t, a fall of by Rs 705/t as compared to Q1FY24 on the back of falling iron ore prices domestically and globally

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